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Like the
human body, a business needs a constant stream of
nutrients to grow and maintain fundamental processes.
Companies
can suffer from low cash flow, slow cash flow, or
erratic cash flow. Interrupted cash flow can be
the equivalent of a heart attack.
Take a close
look at your business. Is your cash flow steady?
Is it optimized or can it be improved upon?
Low cash
flow can be the result of slow sales or increased
competition. This is usually the first symptom a
business manager notices. "Sales are down!
Get out there and start closing business!"
In the case
of low cash flow, the main objective is to boost
revenues. Short term measures such as new
advertising, public relations work, sales staff changes,
etc. all can improve the situation. Long term
measures would include strategic sales planning and goal
assessment.
Slow cash
flow, on the other hand, can be very frustrating.
Sales are still good, but the dollars just aren't coming
in. You have blocked arteries.
In this
case, you might look for ways to improve your
circulation. How long are you waiting for
receivables? Can you speed the process by offering
a discount for quick pay? Should you factor your
receivables to improve cash flow and get a higher return
on the invested money?
Erratic cash
flow requires a pacemaker. You need measures in
place to anticipate slower periods and provide a cushion
for those times. Think of it as a pressure
regulator. When the cash flow is strong, siphon
some of it off to a reserve account. When it
slows, pull from your reserves to keep your heart
ticking normally.
Interrupted
cash flow can be a death sentence for many businesses.
Do you have the reserves you need for emergencies?
Do you have assets that can be leveraged in case you
need to get liquid fast? Most importantly, do you
have a crisis plan in place to cover the unexpected?
It is never
to early (or too often) to take a serious look at your
cash flow. |
